In response to a legal settlement, the three major consumer credit reporting companies — Experian, Equifax, and TransUnion — have new standards to reduce errors and enhance the quality of the credit reports they produce.

 

When you apply for a loan or credit card, the lender's approval and interest rate provided is determined in part by information contained in credit reports, as well as credit scores. Credit reports summarize your credit history and are used to develop your credit score. The higher your score, the more likely you are to qualify for credit, insurance, even employment. Thus, accuracy in your credit report is essential.

 

The three credit reporting companies have begun removing tax liens (a legal claim on the assets of a delinquent taxpayer) and civil judgment debts (court-ordered payment of damages) from consumer credit reports if the information is incomplete. They have also agreed to exclude medical debts until such debts are at least 180 days past due.

"While the changes in reporting standards can mean some negative information will be removed from peoples' credit reports, which is beneficial, consumers still need to understand what is on their credit reports and take steps to ensure they are accurate," said Elizabeth Ortiz, the FDIC's deputy director for consumer and community affairs.

 

What are some simple precautions you can take to build your credit history and preserve good credit scores? In particular, review your credit reports at least once a year to look for discrepancies and errors. Examples of credit reporting errors may include outdated information, missing loan payments, incorrect Social Security numbers, or reporting on individuals with similar names or addresses. You can obtain a free copy of your credit report once every 12 months from each of the three credit reporting companies. You can request the reports at www.annualcreditreport.com or call toll-free 1-877-322-8228. [Please note that although your credit reports are free, you may be charged a fee to obtain your credit scores.]

 

"Make sure you're familiar with the information in your credit reports before you apply for a new job or a loan," said Kristin Strong, chief of the FDIC's Consumer Response Center. "Correcting any errors in advance could help you qualify for a better interest rate on a loan and save you from being denied access to credit, employment, housing or even insurance."

 

Another critical reason to check your credit report is to look for possible signs of identity theft or fraud. Warning signs include an unfamiliar credit card or loan listed in your name. The sooner a fraudulent account is identified in your credit report, the sooner you may be able to limit financial harm. Inaccurate credit report information can be disputed directly with the applicable creditor or online with each of the three major credit reporting agencies: Equifax, Experian and TransUnion.